Waxman-Markey and the Economy
When you listen to conservative members of congress denouncing the Waxman-Markey bill’s sure-to-be-devastating impact on the economy, it’s worth keeping this post from Conor Clarke in mind:
Here’s an easy way of visualizing the costs of Waxman-Markey. The chart below shows projected U.S. GDP with and without Waxman-Markey (drawn from the data annex of the EPA’s big estimate). Projected U.S. GDP without the bill is in orange; it’s sitting behind projected GDP with the bill, which is in grey. The visible orange stripe is the difference between the two scenarios:
I don’t think it can be seriously denied that this is a small price to pay to avert a global catastrophe. The problem with Waxman-Markey is that it wouldn’t, on its own, actually avert said catastrophe. But this isn’t a flaw in the bill’s design, it speaks to the global nature of the problem—no one country’s activities can prevent catastrophe, you need coordinated action by all the world’s major economies.
As Conor says “The big question is whether this bill will increase or decrease the chance of such coordination.” I’ve heard some clever people who don’t want to be silly denialists about the threat of climate change, and who don’t want to be silly alarmists about the threat of Waxman-Markey, but who don’t have a self-conception as belonging to the same political coalition as Henry Waxman and Nancy Pelosi attempt to argue that the answer is “decrease.” But I’ve never heard any of the people actually charged with the international negotiations say that. As best I can tell, everyone involved with the Copenhagen process, everyone involved with the U.N., and all the climate negotiators from the major European countries are hoping for something like this bill to pass in order to give the international diplomatic process additional momentum.
46 Responses to “Waxman-Markey and the Economy”
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June 26th, 2009 at 4:12 pm
I can’t take this chart seriously until Yglesias obscures it with a giant popup balloon in the screenshot. Seriously, what the fuck, Yglesias, you lazy piece of shit. You can’t possibly claim any longer to give a shit about your blog or about your readers.
June 26th, 2009 at 4:23 pm
That assumes people believe in climate Armageddon, and numbers from the EPA. Given the BS out of this administration, I believe in neither.
June 26th, 2009 at 4:41 pm
But… I think you can obviously deny that this is way too much to pay for not even coming close to solving the problem.
This seems to argue that rather than actually being an effective way to fight global warming, this is an effective PR campaign to get cooperation on fighting global warming.
Let’s say that works. I don’t think it will. But OK. It will. So now Germany and France and Japan and China are on board because they think we are really cool. And they agree to some measures that will REALLY fight global warming.
Fine. What are those measures? And once enacted, what does that orange line look like?
Because if a fake half measure has that kind of impact on the line, what’s the real impact?
June 26th, 2009 at 4:44 pm
“I don’t think it can be seriously denied that this is a small price to pay to avert a global catastrophe.”
This is what really annoys me about environmental legislation. The reasoning is always as follow:
(1) Global Warming is happening [I agree to this]
(2) Global Warming is at least partially caused by human activity [I agree to this]
(3) Global Warming will cause a global catastrophe [okay]
(4) Therefore, X piece of legislation or Y Treaty must be enacted or signed so as to thwart Global Warming and save billions of lives. [WTF?]
I’ve yet to see ANY thorough & compelling evidence showing that Waxman-Markey–or any legislation short of calling for a New Dark Age–will have an appreciable impact on Global Warming. In fact, if the prevailing reports are to be believed, we’re pretty much screwed no matter what we do. Sure, it’ll reduce carbon emissions to some degree, but that surely can’t be a sufficient justification for environmental legislation. A more nuanced cost/benefit analysis is needed and is exactly what’s missing.
May be we have a moral obligation to work to prevent Global Warming–I think we do–and therefore should want Waxman-Markey to pass, but I simply am not convinced that this bill or any other bill is the right decision from a utilitarian perspective.
June 26th, 2009 at 4:53 pm
…all the climate negotiators from the major European countries are hoping for something like this bill to pass in order to give the international diplomatic process additional momentum.
Right. Nobody expects the likes of China or India to start taking vigorous action on climate change this year or next. But at some point in the not-too-distant future — let’s call it the early 2020s — the rich world is going to have to get serious about demanding that China/India et al take action. When that time comes, said rich countries had best have their own acts together, or else they’ll have no credibility.
Again, it can’t be said enough: action right now on the part of rich countries isn’t sufficient to get us where we need to be as a planet in 2090. But it is a prerequisite.
June 26th, 2009 at 5:06 pm
At some point you have to start to try and price the externalities. It a necessary step to real progress on the issue.
It’d be great if the opposition to this was truly focused on the most efficient way to do this, or the serious problem of trying to get the Chinese on board, but of course they don’t really give a shit about that. They’re just spouting whatever bullshit they can to try and appease their paymasters.
June 26th, 2009 at 5:08 pm
But what does Ryan Powers think about this chart?!?!
June 26th, 2009 at 5:22 pm
Hilarious. The US is going to grow at a steady 4% annual clip every single year starting next year and through the next 40 years. What is this projection based on? Mass immigration of people yearning to be free? The world condoning your national debt? The whole world disarming because only the US has the moral authority to have nukes? Discovering the biggest oil fields in the world in Kansas?
It is really incredible to see these growth projections in light of barely replacement demographic growth, peak oil, no money, and zero credibility as a nation.
June 26th, 2009 at 5:34 pm
I think talking about the economic costs of preventing Climate Change is silly. It seems clear to me that the political constraints here and globally will prevent us from cutting emissions too much.
June 26th, 2009 at 5:43 pm
… because government cost estimates are always right. Shall we go back and look at the estimates for Social Security or Medicare when they were passed, and compare those to reality?
Seriously Matt, do you even pretend to think before you post?
June 26th, 2009 at 5:45 pm
I don’t think it can be seriously denied that this is a small price to pay to avert a global catastrophe.
How is global warming a “global catastrophe”? Please do a chart showing the consequences of passing, and a failure to pass, Waxman-Markey. Thanks in advance.
June 26th, 2009 at 5:47 pm
Never mind on that request. Jim Manzi has already answered Conor Clarke.
June 26th, 2009 at 5:48 pm
Given the BS out of me, I believe in neither.
Fixed your typo, there.
June 26th, 2009 at 5:48 pm
Hilarious. The US is going to grow at a steady 4% annual clip every single year starting next year and through the next 40 years.
Lupita: Where are you getting this? According to my back of the envelope math, the chart predicts average GDP growth in the 2%-2.5% range. That sounds pretty feasible to me, even with slowing natural rate of population increase (and immigration obviously could be increased by law, if lack of population growth were one’s concern).
It is really incredible to see these growth projections
There’s nothing “incredible” about 2.5% annual growth. If somebody wants to sharpen this estimate, go for it. But I’m sure it’s nothing along the lines of 4%.
June 26th, 2009 at 5:51 pm
It seems clear to me that the political constraints here and globally will prevent us from cutting emissions too much.
Right. Because everybody knows it’s a rule of physics that the prevailing political conditions of 2009 will be identical in 2018, or 2023, or 2031…
June 26th, 2009 at 5:54 pm
Seriously Matt, do you even pretend to think before you post?
Seriously, Robertson, we already know that given the choice of paying an extra dollar in property taxes or having someone down the street drowned in raw sewage, you’d want to keep that dollar. You’re a selfish fuck, and there’s a basic honesty in that, so celebrate it.
June 26th, 2009 at 6:07 pm
@#6 (Jasper): India’s total CO2 emissions are about a fifth of China’s and US’ respective total CO2 emissions, and India’s per-capita CO2 emissions are about 1/15th of US’ and 1/5th of China’s. Therefore, India is not in the same category as China (much less in US’) on CO2 emissions by either measure. Part of the reason for India’s low emissions are it’s massive public transportation system and Indians’ predominantly vegetarian diet. On its own, India has been investing in several solar and win energy projects as well as in biogas (suitable for Indian villages) and other initiatives that have existed in India for quite sometime.
June 26th, 2009 at 6:11 pm
@#17: wind energy projects
June 26th, 2009 at 6:11 pm
If I cared about paying an extra dollar in property taxes, I sure wouldn’t live where I do. You want to know why I oppose handing more money to the bureaucracy? I’ll give you a small local example.
Where I grew up, in suburban New York, we had two late buses for the high schools to run students home who participated in sports or other activities (band, drama, clubs, etc). Now I live in Maryland, in one of the richest counties in the US. The local school district claims that it has no money to run after school buses. So all of the parents of students who have after school activities either give their kids cars, or run to the schools to pick them up.
We have countless “administrative staff” buildings, and tons of “administrative days off” during the school year, but the clowns who run the schools here can’t be bothered to run a few activity buses.
Better to give a bunch of educrats worthless jobs pushing paper, I guess.
When I’m confronted with lunacy like that, is it any wonder that I oppose handing more money to the govt? If the smallest level of local govt can’t be bothered to be efficient, my faith in the Feds is miniscule.
Going back to the climate bill, this isn’t about the cost per se – it’s about the stupid futility of it. The other major industrial powers aren’t playing, and won’t be playing. Why? Listen to their public statements, and understand how many tens of millions of very impoverished people still live in India and China. What’s the liklihood of either nation deciding to make energy dramatically more expensive when they have relatively recent memories of famine conditions? Do you think either nation’s leadership wants to increase their costs such that social unrest is a real possibility?
If you do, then get in line with the other delusional people. It’s not that I can’t afford the hikes this bill will bring – it’s that:
– the poor here (in say, Baltimore) can’t
– the other industrial powers won’t play along, meaning that offshoring will only accelerate
– the likely response to the second problem was stated by Steven Chu last fall: we’ll need to erect tariff walls to equalize costs
We know what tariff walls in the midst of a recession do already. Check the year 1930 out.
June 26th, 2009 at 6:21 pm
James, oh James.
(1) CBO estimates that the bill will be a net benefit to the poor.
(2) Your arguments amount to “well, for all we know no one’s doing anything, so we might as well do nothing, thereby ensuring no one does anything.”*
(3) Are you seriously using Smoot-Hawley as an argument against taking action on climate change? You do realize, right, that if people put up tariffs, they can and are struck down unless there’s a justification for them?
*Just the statement of your argument makes it not worth refuting.
June 26th, 2009 at 6:42 pm
Because the CBO is always accurate. Right. Let me laugh a few times before I go on.
There’s no good reason to take action that will damage the US economy when the other industrial economies will not follow suit. The liklihood of China and India telling their hundreds of millions of poor to just buck up is, well, laughable. Look at their ongoing construction of coal fired plants, and their plans for more if you don’t believe me. Good luck with telling those impoverished millions that they just have to suck it up
And on Smoot Hawley, read what Steven Chu said. Sure, laws can be struck down. They can also do immense damage before that happens. Like, say, in 1930.
June 26th, 2009 at 6:42 pm
They just pulled Kennedy out of rehab to vote on the bill. This congress is a joke.
June 26th, 2009 at 6:55 pm
You want to know why I oppose handing more money to the bureaucracy?
We’ve already established that.
it’s about the stupid futility of it.
As David Kurtz put it today:
You’re just setting yourself up to have an excuse. Be honest enough to say “it won’t affect me, and I can’t see it working anyway, so I don’t care”, because that’s the mentality you reflect every time you show up here.
June 26th, 2009 at 7:11 pm
(1) CBO estimates that the bill will be a net benefit to the poor.
Only if you ignore the most important costs of the bill – namely the adverse impact on our economy. And the costs that the CBO ignores are, coincidentially, what this entire post, and the chart, is about. Or perhaps you didn’t read or didn’t understand the entire point of the post?
June 26th, 2009 at 7:23 pm
Are you seriously using Smoot-Hawley as an argument against taking action on climate change? You do realize, right, that if people put up tariffs, they can and are struck down unless there’s a justification for them?
Fine, but without the tariffs, making stuff in foreign countries is going to become even more economically attractive, and we will lose more of our manufacturing to foreign countries.
June 26th, 2009 at 7:36 pm
ice: Thanks. Helpful info.
June 26th, 2009 at 7:38 pm
Oh how I love the argument schema:
1) I can identify an instance I of public administrative misallocation of resources.
2) Therefore, I am not obligated to pay taxes.
June 26th, 2009 at 8:06 pm
Lupita: Where are you getting this? According to my back of the envelope math, the chart predicts average GDP growth in the 2%-2.5% range.
Mine was also back of the envelope math, however, since you question me, my Quattro ProX3 spreadsheet calculation gives me 3.35% annual growth. Considering that during the high immigration, high debt, sole superpower, bubble years (1990-2008), growth averaged only 2.8%, it is unbelievable that growth will be even higher now that the US’ shadow banking system has disappeared, other powers have emerged, the NPT is dissolving, the WTO is dead, the dollar is tanking, and the national debt is exploding. American hegemony, which sustained your growth, has gone down the tube.
even with slowing natural rate of population increase (and immigration obviously could be increased by law, if lack of population growth were one’s concern).
… and rising unemployment. Try to increase immigration with unemployment rising and all the bubble construction jobs gone and you would have to add social unrest to your list of problems.
June 26th, 2009 at 8:09 pm
No problem, Jasper (@#26). There is a wealth of data at this WRI site: http://cait.wri.org (regn. req.), if you would like to explore. I am posting the numbers for 2005 from that site.
__________________
Yearly data for 2005.
Total CO2 emissions (unit: Millions of (metric) tons of CO2 : Mt CO2)
World: 27,525.7 Mt
US: 5,891.6 (21.4% of world)
China: 5,577.3 (20.26%)
India: 1,221.6 (4.44%)
__________________
Population (Thousands):
World: 6,461,584
US: 296,507 (4.59%)
China: 1,304,500 (20.19%)
India: 1,094,583 (16.94%)
__________________
Per-Capita CO2 (Metric tons per person)
World: 4.46
US: 19.87
China: 4.275
India: 1.12
__________________
June 26th, 2009 at 9:49 pm
Even if I accepted the BS that man is responsible for global warming and that the earth will dramatically change unless we do something, I wonder who you people think should choose the winners and losers. The only way to substantially reduce warming is to reduce the population and forse those left to pay a large percentage of their income on energy. That’s the dollars currently spent on second homes, dinners out, boats, flat screens. Since we will no longer have the disposable income to buy those things, we no longer need all the workers making them. Cap & Trade is a gargantuan wealth transfer from the productive part of society (industry & taxpayers) to the unproductive parts (gov workers and wealth redistribution) Your char is a blatent lie. When you cap CO2, you’re defining the maximum industrial capacity of the planet. That means zero growth (except for cheaters) and no jobs. It’s like a city saying no more growth. No new houses, cars, births, in effect, Detroit, and your kids have to move away because they can’t live in the city and add to the carbon footprint. The long term consequences are disasterous.
June 26th, 2009 at 9:58 pm
I just read that the bill passed the House 219-212. I looked at the roll call. I believe 44 Democrats voted against the bill, among the No”s, Dennis Kosinich of Ohio and Fortney “Pete” Stark of California. Stark’s district, I believe is in the area where Shell has a big refinery as does Chevron, I believe. He has been around too long. Dennis, I don’t understand even if Cleveland has industry. Did each make sure the Dems had enough votes for passage without their vote? I don’t know
June 26th, 2009 at 10:43 pm
Mine was also back of the envelope math, however, since you question me, my Quattro ProX3 spreadsheet calculation gives me 3.35% annual growth.
Lupita: You can’t be plugging in your variables correctly. At 3.35%, US real GDP would double by 2032 or so, and very nearly quadruple by the chart’s end. As you can see, it’s clearly not on pace to do so. But this is all irrelevant. Clarke’s point is not to make projections about US economic growth as such. His point is that this growth — no matter what it turn out to be — will not be greatly impacted in negative fashion by the legislation just passed by the House. Rather, a US economy operating under Waxman-Markey rules will achieve about 99% of the economic expansion it would manage if carbon curbs were not implemented.
Dennis, I don’t understand even if Cleveland has industry.
I haven’t looked into it, but surely Kuchinich voted “no” because of concerns the bill was excessively generous to polluters, right? Or maybe that’s just what he’s claiming is his reason. Because now that I think of it, Waxman can’t be all that popular in Cleveland.
When you cap CO2, you’re defining the maximum industrial capacity of the planet. That means zero growth
What a strange and absurd claim. There are obviously forms of energy available that won’t be affected by limits on C02. How can you stand being so stupid?
June 26th, 2009 at 10:59 pm
yes, there are forms of energy that aren’t affected once their built – although building them is another topic entirely.
– Wind and Solar – not 24×7, no practical power storage mechanism. Then There’s the need to run powerlines over long distances, which you object to. Then there’s the need to build the solar arrays in places like the Mojave desert which – wait for it – you object to. Then there’s nuclear, which – wait for it – you object to.
That leaves carbon emitting energy, which – wait for it – you object to
Ultimately, you all want to live in cities that can’t be powered by plants that you don’t want built and powerlines you don’t want to see.
June 26th, 2009 at 11:41 pm
Who are you talking to?
Who is “you?”
You just made “you” up to make yourself feel smart, didn’t you?
June 26th, 2009 at 11:44 pm
“You” is everyone here who favors this bill and this approach. You all have fantasy beliefs about Wind and Solar being something more than a trivial part of the power mix. You oppose nuclear power. You oppose power lines being built anywhere. You oppose solar arrays in places they might generate some actual power (like the Mojave desert). In general, the left opposes power use – which is truly amusing, given the left’s propensity for favoring urban living.
June 26th, 2009 at 11:45 pm
I think it’s pretty clear who’s got the “fantasy beliefs.”
June 26th, 2009 at 11:55 pm
[...] ready for a lot of contrarianism about the cap-and-trade bill. Yglesias has a pretty good take [...]
June 26th, 2009 at 11:55 pm
[...] ready for a lot of contrarianism about the cap-and-trade bill. Yglesias has a pretty good take [...]
June 27th, 2009 at 12:21 am
James (36)
as a staunch leftist, I’m all for nuclear power, power lines built to Kansas (my home state) and building massive wind turbines all over the midwest, particularly over the protests of the Republicans who live there and have NIMY syndrome. I’m all for power creation and use. I acknowledge there are leftists who have a ‘back to the land’ conservationist ideology, and more power to them, but generally MattY and mainstream liberals think that 1) global warming is bad, and we should see if we can do something about it and 2) we probably haven’t invented everything possible yet, and if we properly price negative externalities, new possibilities will be opened up.
June 27th, 2009 at 12:37 am
The Kucinich vote would have been because of the give-aways to the emitters … a vote against it for being too weak, rather than a vote against it for being too strong.
Its getting hot in here reports:
June 27th, 2009 at 12:44 am
@39 – it’s not conservatives opposing nuclear power, or the solar array in the Mojave, or the windmills off the shore in MASS. Let me know when you feel like standing up against Greenpeace, et. al., to allow any of that to happen.
Since I don’t see that happening, the best fun I’ll have if the senate passes this mess will be watching Matt be stunned when his power bill prices him out of DC, and he has to move to the hinterlands somewhere
June 27th, 2009 at 1:04 am
Lupita: You can’t be plugging in your variables correctly
You are absolutely right. OK, the graph shows at 2.5% annual growth. That is still practically the same growth as during the hegemonic bubble years which is unreasonable for all the reasons I stated in my previous post.
But this is all irrelevant. Clarke’s point is not to make projections about US economic growth as such. His point is that this growth — no matter what it turn out to be — will not be greatly impacted in negative fashion by the legislation just passed by the House
I understand. I just wanted to point out that his growth projection was a pipe dream.
June 27th, 2009 at 1:06 am
Those “reduced costs” include all the “savings” from energy efficiency regulation:
Really bright…. Ban consumers from buying what they want and applaud the savings! (little savings in banning impopular products, and inefficient products need to be popular or noone would buy them, classic example Edison’s light bulb, bought 19 times out of 20 in the USA – and therefore a banning priority!)
Amazingly, few if any bloggers or journalists
look at and criticize all the efficiency regulation
(buildings, cars, dishwashers etc)
The assumption is that all energy efficiency legislation is good for consumers.
The fact is that efficiency regulation on a product sacrifices performance, construction, appearance and price features, and does not necessarily give the savings suggested anyway.
See
http://ceolas.net/#cc2x
onwards regarding efficiency regulation effect on buildings, lightbulbs, cars, dishwashers and other products.
As for Cap and Trade…..
Cap and Trade is an expensive roundabout way of achieving…not very much.
Whatever one’s attitude to greenhouse gas emissions, the point is that they can simply and effectively be lowered in a first phase just by changes in electricity and transport (together responsible for 4/5 of emissions).
Moreover those changes are advantageous regardless of also lowering CO2 emissions:
1. Local environmental benefit from the reduction of noxious substances emitted from electricity or transport combustion of hydrocarbon fuel, regardless of any less tangible global benefit from CO2 reduction – and that is one reason why the focus on carbon trading is wrong, compared with the focus on reducing fuel combustion emissions.
2. Energy supply benefit from the diversification of electricity generation with related improved grid distribution and service competition for consumers.
3. Energy supply benefit from the diversification (electrification, hydrogen fuel enablement etc) of transport, reducing the dependency on oil imports.
In 2020, from then available evidence, either
1. There is increasing consensus that global warming can’t be stopped anyway, and that further specific reduction attempts have no value: In that case little has been lost, since the described changes in electricity and transport industry carry their own benefit, or
2. Consensus remains that CO2 emission reduction should continue, in which case America is on track, and may continue with more specific emission reduction efforts for the years 2030 aqnd 2050 that also bring in agriculture, cement, steel and other industry whose businesses hitherto did not need disruption.
Cost to businesses – and the consumers – is kept to a minimum,
by equity and long term loan finance, the latter can be fed/state guaranteed to keep down interest rates, with slow payback anyway giving little affected consumer electricity bills or car costs.
No disruption of American business practice and planning, by emission trading.
No volatile extra emission trading costs for a range of businesses, passed on to consumers.
Understanding Cap and Trade + why it is bad for America, see
http://ceolas.net/#cce5x
.
June 27th, 2009 at 2:51 am
Um, something like this bill perhaps, but not *this bill*. If this is the limit of US ambition it pretty much rules out triggering the European pledge to cut emissions by 30% if others will. It lets the problem countries – Canada, Australia, Japan, New Zealand etc. pass equally weak legislation, and the massive provisions for offsets is the last thing anyone wanted.
I assure you that the negotiators from the G77 block, the Small Island States and probaly even the Chinese aren’t going to be happy with this. The Europeans might be happy, but only because it lets them retain their claim to being the world’s leading nations on this issue. Anyone who actually wants to solve the problem can’t view this as much more than a first step in no particular direction.
June 27th, 2009 at 9:11 am
When looking at the numbers of a study you have to look at the assumptions. The EPA did the following:
1) Assumed massive increases in electrical generation by nuclear power (given the current POTUS / Congress doubtful–didn’t they just close Yucca mountain?)
2) Assumed massive increases in carbon capture and sequestration that would allow coal to continue to produce electricity at the same cost. (Even if CCS works well, it will cost significantly more.)
3) Assumes ALL “income” from sale of credits is “refunded” to lower-incomes. (But yet the bill only states 15% must be “refunded.” The EPA acknowledged that if less is “refunded” the negative impact on GDP will be more significant. Read: more unemployment.)
4) Only analyzed the effect for the period BEFORE the real pain occurs, which could possibly be the best part of the bill, that there is over 10 years to repeal it before it gets REALLY nasty.
But I think the really telling feature of the legislation is the point at which they put in special unemployment compensation for the people who will be unemployed “As a result of this legislation.” I know that it will be far more than those who are employed by this legislation. But I seriously do hope that we do triple the number of nuclear power plants in this country, since that is what I operated in the Navy–my salary is going up!
July 1st, 2009 at 2:09 am
[...] change legislation, the Waxman-Markey bill,won’t cost that much. Here is a handy chart from Think Progress that compares GDP with and without cap and [...]